In this month's "Notes & Trends:
BANKRUPTCY
JUDICIAL LAW
• Eighth Circuit Strikes Prohibition on Advising Clients to Incur Additional Debt in Contemplation of Bankruptcy. The Eighth Circuit Court of Appeals struck a provision of the Bankruptcy Code prohibiting “debt relief agencies” from advising a client to incur more debt in contemplation of bankruptcy, holding it an unconstitutional restriction on free speech. The provision, enacted in 2005, was overbroad because it could prevent attorneys from giving prudent advice to clients, such as to refinance current debt or incur a secured loan on a dependable motor vehicle to travel to work. While other advice may encourage bankruptcy abuse, the blanket prohibition was not narrowly tailored to meet Congress’s objective.
The court upheld requirements under the Bankruptcy Code that “debt relief agencies” conspicuously disclose that they provide services “with respect to bankruptcy relief” and are “debt relief agencies.” The court found that these disclosure requirements sought to prevent deceptive advertising. The agencies’ interest in not disclosing factual information about the general nature of their services had only minimal constitutional protection. On the other hand, Congress had a legitimate interest in preventing deceptive advertising and accomplished its objective through a rational regulation. Milavetz, Gallop & Milavetz, P.A. v. United States, 541 F.3d 785 (8th Cir. 2008).
• IRA Distributions Not Income for Purposes of Plan Confirmation. The Eighth Circuit Bankruptcy Appellate Panel held that distributions from an IRA are not included in the calculation of disposable income. The decision impacted whether Debtor would have a 36- or 60-month repayment period for her Chapter 13 plan. A 60-month plan would arise if Debtor’s disposable income exceeded the local median household income. Debtor’s disposable income would have exceeded the median if the court counted an IRA distribution Debtor’s husband received within six months before her bankruptcy.
The BAP concluded that the IRA distribution was not “current monthly income” included in the calculation of disposable income. The BAP defined “income” for bankruptcy purposes as “money from one’s business, labor, or capital invested; gains, profits, salaries, wages, etc.,” but likened the IRA distribution to withdrawing money previously earned from a savings account. The BAP emphasized that money deposited into an IRA would have been counted as “current monthly income” at the time earned even if the debtor deposited it into a tax-deferred account. As a result, counting an IRA distribution as income would double-count that income and potentially create an artificially high income. In re Zahn, 391 B.R. 840 (8th Cir. BAP, 2008).
• Joint Tax Refunds Allocated by Proportion of Wages Withheld. A debtor and its estate receiving a joint income tax refund from a pre-petition return acquire an interest only in that portion of the refund attributable to withholdings made by the debtor. When a married couple in a joint bankruptcy proceeding received a $12,000 joint tax refund based on pre-petition earnings of the husband, they sought to split the proceeds between their estates. By splitting the refund 50-50, the couple could maximize their collective exemptions; the husband did not have sufficient exemption capacity to exempt the entire refund.
The trustee objected to the 50-50 split, arguing that since the wife did not withhold during the taxable year, she did not have any property interest in the tax refund. The BAP affirmed the objection and held that tax refunds received by joint debtors are allocated between the spouses based on their respective withholdings. The BAP, examining competing rulings on this issue from other circuits, found that Minnesota state law determines the property interests created by the tax refund, and confirmed that the tax refund retains its original character as wages earned and withheld. Since Minnesota is not a community property state, wages earned by a spouse do not automatically become joint marital property absent a specific devise to the other spouse. Under the Internal Revenue Code, a joint tax return does not create joint property interests in the refund. In re Carlson, 2008 WL 4148318 (8th Cir. BAP 2008).
— Mychal A. Bruggeman
Mackall, Crounse & Moore, PLC
In this month's "Notes & Trends:
CIVIL LITIGATION
JUDICIAL LAW
• Arbitration. Amtex Securities, Inc. (“Amtex”) sued 3M Company (“3M”) in state court in Texas for unjust enrichment, breach of contract, breach of the duties of good faith and fair dealing, and tortious interference with contract. 3M removed to federal court in the Southern District of Texas. 3M then filed a demand for arbitration with the American Arbitration Association and a motion to compel arbitration in federal district court in Minnesota. Amtex then amended its complaint. 3M moved the Texas state court to stay proceedings on the amended complaint under 9 U.S.C. § 3 until the federal district court in Minnesota ruled on 3M’s motion to compel arbitration. The Texas state court granted the motion to stay. Neither party tried to join or transfer the actions. The federal district court in Minnesota granted 3M’s motion to compel arbitration. Amtex appealed the ruling granting 3M’s motion to compel arbitration to the Court of Appeals for the Eighth Circuit.
3M argued on appeal that the Minnesota district court’s order was a non-final interlocutory order over which the Eighth Circuit had no jurisdiction. 3M specifically argued that the Minnesota order compelling arbitration and the Texas order staying proceedings should be considered together for purposes of finality. The Eighth Circuit Court of Appeals rejected that argument. The court explained that when a motion to compel arbitration and a motion for stay are brought separately, they should be treated individually and that a resulting order compelling arbitration is final and appealable. The Eighth Circuit Court of Appeals then concluded that the Minnesota order compelling arbitration was final and appealable since it disposed of the only matter brought before the district court. The court also affirmed the district court’s order compelling arbitration. 3M Co. v. Amtex Sec., Inc., 2007 WL 2780371 (D. Minn. 2007).
— Haley Schaffer
Maslon Edelman Borman & Brand, LLP
In this month's "Notes & Trends:
CRIMINAL LAW
JUDICIAL LAW
• Right to Counsel; Waiver by Conduct. Over the course of several months and five court appearances, the defendant, ineligible for a public defender, was repeatedly warned by the district court to hire private counsel. The initial court appearance was on February 27, 2006; trial was eventually set for February 14, 2007. Defendant had given the district court some indication that he was attempting to hire private counsel, and never expressly waived his right to counsel. The trial proceeded with the defendant unrepresented. The trial court did not appoint standby counsel. The defendant was convicted of all charges. Held, defendant constructively waived his right to counsel by repeatedly failing to hire private counsel. Following the third, ninth and seventh federal circuits, the Court of Appeals found that defendant’s actions and conduct showed that his waiver, although constructive, was knowing and intelligent. State v. Jones, 755 N.W.2d 341 (Minn. Ct. App. 2008).
• Spreigl and Other Bad Conduct; Relationship Evidence May Be Subsequent to Crime Charged. Appellant was on trial for second-degree assault, involving an incident which had taken place on June 29, 2006. The state introduced new evidence of subsequent acts committed by defendant against the same victim on August 5 and August 15, 2006, as evidence of similar conduct against the victim of domestic abuse under Minn. Stat. § 634.20. Held, admission of that evidence was proper as relationship evidence. The Court of Appeals notes that the statute is unambiguous on its face, and does not state that “similar conduct” is admissible only if that conduct occurred prior to the incident giving rise to the charged offense. To the contrary, the court noted that in 2002, the legislature amended the language in the statute from “similar prior conduct” to “similar conduct.” State v. Lindsey, 755 N.W.2d 752. (Minn. Ct. App. 2008).
• Firearms; No “Fleeting-Possession Defense.” Appellant was driving a vehicle containing several individuals, which was detained because the license plate indicated to police that the vehicle was stolen. In an inventory search, one of the officers found a loaded revolver midway on the floor of the back seat. In a statement to police, appellant said that he had no idea that the gun was there until he saw it being passed around in the back seat. Appellant admitted that when he removed his hat, one of the individuals in the back of the seat placed the gun in it. Appellant looked at the gun, touched the cylinder release and then, using his hat, closed the cylinder. Finally, he passed the hat, with the gun inside, to the passenger in the back seat. Held, a felon-in-possession conviction was sustained by the evidence. State v. Houston, 654 N.W.2d 727 (Minn. Ct. App. 2003), review denied (Mar.ch 26, 2003). Following the reasoning of several federal circuits, the Court of Appeals wrote: “In the interest of public safety, felons and those who have committed crimes of violence are simply not people whom society trusts to possess firearms even ‘fleetingly’.” In re Welfare of S.J.J., 755 N.W.2d 316 (Minn. Ct. App. 2008).
• Expungement; Separation Of Powers Bars Expungement. Appellant S.L.H. was convicted of fifth- degree felony possession of a controlled substance in 1992, when she was 20 years old. The sentence was a stay of imposition and probation for three years, which she successfully completed, resulting in the offense being deemed a misdemeanor. In 2006, appellant petitioned for expungement of the controlled substance conviction. The grounds for expungement included her status as a single parent and her wish to obtain employment as a teacher or medical assistant, employment she said she could not obtain without the expungement. Hennepin County, the City of Crystal, and the BCA objected. The district court granted her request to expunge judicial branch records (by sealing the files). But as the court felt that her constitutional rights had not been violated, it declined to extend the order to include non-judicial records.
Held, that because the appellant had not demonstrated that a “core judicial function” was implicated, the district court and Court of Appeals had properly denied extension of the expungement order to the executive branches. The Minnesota Supreme Court recognized the helpfulness of expungement with respect to employment, “[b]ut helping individuals achieve employment goals is not ‘essential to the existence, dignity and function of a court because it is a court.’” The Supreme Court noted that the dicta in State v. C.A., 304 N.W.2d 353 (Minn. 1981) allowing extension of expungement orders “in appropriate circumstances” to the executive branches, appears limited to situations where a court’s core judicial function is implicated. Also, in C.A., the petitioner’s conviction had been set aside, whereas S.L.H. still stood convicted. Thus, “expungement of her criminal records held outside the judicial branch is not necessary to grant her full relief.” Further, the Supreme Court noted that Minn. Stat. § 13.187, subd. 1(b) of the Minnesota Government Data Practices Act requires the BCA to maintain records of a defendant’s conviction for a 15-year period following the discharge of a defendant’s sentence, and that this information remain public. Concomitantly, Minn. Stat. § 245C.03, subd. 1, of the Department of Human Services Backgrounds Studies Act, requires disqualification from DHS licensed employment if a background study reveals, by a preponderance of the evidence, that the individual has committed any of several delineated criminal acts. Therefore, “expungement of S.L.H.’s criminal records held outside the judicial branch would effectively override the legislative determination that some of these records be kept open to the public.” State of Minnesota v. S.L.H., 755 N.W.2d 271 (Minn. 2008).
• Relationship Evidence; Objection Not Perfected: Omission of Limiting Instruction. In a prosecution for felony violation of an order for protection, based on a prior conviction, the state introduced prior acts of domestic abuse pursuant to Minn. Stat.
§ 634.20. The defendant moved in limine to bar admission of such evidence at trial. In response to this in limine motion, the trial court issued a limited pretrial ruling because the court was not fully informed as to the exact nature of such evidence. The ruling also stated that it was difficult to assess the probative value versus prejudicial effect when no details of the evidence had been submitted. The court also warned the state against placing too much emphasis on the evidence of past misconduct. When the past relationship evidence was introduced at trial, the defendant made no contemporaneous objection.
Held, because the court did not make a definitive ruling on the in limine motion, the appellant should have renewed his objection upon the admission of said evidence. Because the defendant failed to object, at that time, any error must be analyzed under the plain error standard of review: “We conclude that [the appellant] had the burden to renew an objection if he believed that the state was introducing relationship evidence in violation of the district court’s limited pretrial ruling.” Furthermore, although it was error for the court to not issue a limiting instruction upon the admittance of this relationship evidence, as required by State v. Meldrum, 724 N.W.2d 15 (Minn. Ct. App. 2006), review denied (January 24, 2007), since the appellant did not request or object to a lack of a cautionary instructions, plain error analysis was again used. State v. Word, 755 N.W.2d 776 (Minn. 2008).
• Blakely; Multiple Forms of Sexual Penetration Constitute Aggravating Factor. Appellant was convicted of first-degree criminal sexual conduct for abusing his 14-year-old stepdaughter, age 14, over a five- month period. Through penetration, an STD was transmitted to the victim. The victim testified that appellant penetrated her vaginally with his finger and penis at least 10 times each, and orally with the latter as many times. After a Blakely sentencing hearing, appellant was given a double durational departure to 288 months. The sentencing jury found three aggravating factors: multiple acts, multiple forms, and injury to the victim. Held, the 288- month departure is affirmed. The judge should not have relied upon the “multiple acts” ground for departure, because that was a separate offense with which the appellant was not charged (Minn. Stat. § 609.342, subd. 1(h)(iii)). But appellant conceded that injury is a proper aggravating factor, and the Court of Appeals rejected the defendant’s argument that multiple forms of penetration is “typical” of the offense with which he was convicted. State v. Adell, 755 N.W.2d 767 (Minn. Ct. App. 2008).
• Conditional Release; DOC Has Obligation to Restructure Conditions of Release. Appellant was released from Washington County Jail as a Level II sex offender and was placed on intensive supervised release (ISR). One condition required him to live in an approved residence. Neither the DOC agents nor the appellant were able to find any residence which would accept him (either half-way house or private residence). At the administrative hearing, it appeared that a half-way house was available in the neighboring county, yet the agents testified that they had been given directives not to supervise across county lines. Therefore appellant’s conditional release was revoked, and he was returned to prison. Held, the DOC has an obligation to restructure the conditions of the appellant’s supervised release when no suitable residence exists in his county of commitment, but suitable residences are available in the neighboring county. Furthermore, the DOC mistakenly believed that they had no further authority to do anything except revoke the appellant’s release. To the contrary, the DOC must consider restructuring the appellant’s release to seek a plan that can achieve his release from prison to include placement in a suitable residence, whether in Washington County or in a neighboring county. State ex rel. Marlowe, v. Fabian,755 N.W.2d 792 (Minn. Ct. App. 2008).
• Tribal Jurisdiction; Driving after Revocation. For purposes of determining state jurisdiction under Public Law 280, the State of Minnesota does have the ability to prosecute a tribal member who commits the offense of driving after revocation on tribal land, because that offense is criminal/prohibitory, and not civil/regulatory. In this case, the appellant was stopped for speeding in Leech Lake Reservation. Although Native American Indian, he was not a member of the Leech Lake Band, but a member of the Minnesota Chippewa Tribe. The appellant’s driving privileges had been revoked under the state’s implied consent law for operating a motor vehicle with a blood alcohol concentration of .15%. State v. Losh, 755 N.W.2d 736 (Minn. 2008).
• Sentence; Court Properly Delegated Treatment Conditions. As part of her sentence for DWI, the appellant was required to complete a chemical use assessment and follow the recommendations. It was recommended that appellant enter into in-patient treatment, which she refused to do, on the defense theory that in order for this to be a condition of probation, it needed to be ordered specifically by the judge. Held, while chemical dependency treatment is deemed to be an intermediate sanction, the court in this case did not improperly delegate sentencing authority. “We conclude that allowing a chemical health assessor to determine a probationer’s need for treatment and the type of level of treatment needed, if any, delegates only administrative limitation of a condition imposed by the court.” Hence, the probation violation ordered by the district court judge is affirmed. State v. Bradley, 756 N.W.2d 129 (Minn. Ct. App. 2008).
• Vulnerable Adult Exploitation: Statute Not Unconstitutionally Vague; Joint Accounts May Create Fiduciary Duty. In this appeal by the state, the Court of Appeals determined whether the vulnerable adult exploitation statute may be used to prosecute a joint account holder who dissipated the funds of a joint tenant who was vulnerable. In this case, respondent was the son of L.C., who suffered from dementia and lacked the capacity to manage her affairs. On February 2003, L.C. opened a joint checking and savings account with respondent, and transferred all of her money to those accounts. In approximately a year and a half, funds in the total amount of $107,000 were depleted from the account, 75% of which were spent on the respondent’s personal needs.
Held, in this case of first impression, for purposes of prosecution under the vulnerable adult financial exploitation statute, Minn. Stat. § 609.2335, subd. 1, a fiduciary obligation may be, but is not necessarily part of, joint account arrangements. Factors to be examined include (1) the legal, familial or personal relationships between the parties; (2) the capacity or sophistication of the parties; (3) who contributed the funds to joint accounts and in what ratio; and (4) the parties’ understanding of their respective roles and responsibilities. Weighing each factor, the court found that a jury could infer or find the existence of a fiduciary relationship. Furthermore, the power of attorney was executed between L.C. and the respondent, which, by itself, created a fiduciary duty under the law. State v. Campbell, Ct. App. 09-30-08.2008 WL 4394756 (Minn. Ct. App. 2008).
• Ineffective Assistance Of Counsel. The Knaffla rule does not apply where appellate counsel is trial counsel and ineffective assistance of counsel is raised for the first time in post-conviction petition. Jama v. State, 756 N.W.2d 107 (Minn. Ct. App. 2008).
— Frederic R. Bruno
Frederic Bruno & Associates
In this month's "Notes & Trends:
EMPLOYMENT & LABOR LAW
JUDICIAL LAW
• Breach of Contract. The reversal by a university president of a recommendation by an academic committee that a professor be granted tenure did not constitute a breach of contract. Because the faculty handbook explicitly reserved the final decision-making authority to the president, there was no viable breach of contract claim after the president overturned the internal recommendation for tenure. Nash-Marshall v. University of St. Thomas, 2008 WL 3290383 (Minn. Ct. App. 2008) (unpublished).
• Whistleblower. A laid-off employee was not entitled to pursue a claim under the Minnesota Whistleblower Act, Minn. Stat. § 181.932, for failure to be re-hired. The employee’s claim that he was not re-hired because while employed he had expressed concerns about the safety of a vehicle, was not maintainable under the whistleblower statute or the Occupational Safety & Health Act, Minn. Stat. § 182.654. Both statutes are designed to protect current employees, and the plaintiff was not employed at the time he was told that he would not be re-hired, which negated coverage under each of the measures. Carlson v. Arrowhead Concrete Works, Inc., 2008 WL 3290110 (Minn. Ct. App. 2008) (unpublished).
• Racial Discrimination. A Caucasian employee’s claim of reverse discrimination failed. The employee, who acknowledged poor work performance, was unable to pursue a reverse discrimination claim on grounds that a minority employee received favorable treatment because the employer had legitimate, non-discriminatory reasons for terminating the employee, including 11 disciplinary incidents. Anderson v. Fairview Health Services, Inc., 2008 WL 3289269 (Minn. Ct. App. 2008) (unpublished).
• Non-compete Agreement. The failure to establish damages resulted in a reversal of a determination of civil conspiracy to violate a non-compete agreement. The jury’s verdict that an attorney conspired with an employee and her new company to interfere with a non-compete agreement with the employee’s former company, which the attorney drafted, was overturned by the Court of Appeals. Because there was no evidence of underlying damage, the conspiracy claim must “fail.” GSS Holdings, Inc., v. Greenstein, 2008 WL 4133384 (Minn. Ct. App. 2008) (unpublished).
• Employee Benefit Plans. The payment by a banker of a company’s trustee in bankruptcy to creditors did not violate the rights of the company’s employee-benefit plans. The payments came from unpaid plan contributions that had not been withheld from employee paychecks. Because they had not been withheld, they constituted employee contributions, rather than employer contributions, and thus were not assets of the benefit plans. Accordingly, it was appropriate for the trustee to use those funds to pay creditors rather than contribute them to the benefit plans. In re M&S Grading, Inc., 2008 WL 4133863 (8th Cir. 2008).
Allowing a correctional employee to participate in a retirement plan based solely on the assertions by the employee’s county, without any investigation, warranted reversal. The Minnesota Court of Appeals held that the Public Employee Retirement Association (“PERA”) erred in allowing the employee into the plan without considering his past or present job duties; and its decision to allow the employee “prospective membership” was not based on substantial evidence. The decision was later over-passed in a decision by the PERA Board on evidence of legal grounds. In re Hanson,2008 WL 4133837 (Minn. Ct. App. 2008) (unpublished).
• Workers Compensation. Attorney’s fees and costs may be awarded by the workers compensation courts to court-appointed successor guardians or conservators if an appointment to protect an employee’s interest is required under the Workers Compensation Act. While fees and costs may be awarded to the guardian, the statute does not permit compensation to a guardian or conservator for services rendered or for the costs of an annual accounting to the probate court. Botler v. Wagner Greenhouses & One Beacon Insurance Company, 754 N.W.2d 665 (Minn. 2008).
• Unemployment Compensation. An unemployed architect who refused to accept a job offer on a temporary basis, while awaiting a better, more permanent offer from another company, was not awarded unemployment compensation. Although the claimant may have had a “moral” conflict in taking a temporary position with the intention of possibly quitting shortly thereafter if a permanent position materialized, that quandary did not constitute a “statutory basis ... to remain eligible for unemployment benefits after rejecting suitable employment,” according to the Minnesota Court of Appeals in construing the statutory requirement that an unemployment compensation applicant accept “suitable” employment under Minn. Stat. § 268.035, subd. 13(c)(a)(2). O’Brien v. AeroTek, Inc., 2008 WL 3835813 (Minn. Ct. App. 2008) (unpublished).
• Unemployment Compensation. An employee who injured a co-worker after an argument was disqualified from unemployment compensation benefits on grounds of “misconduct.” The claimant’s disregard for safety concerns warranted denying him unemployment compensation benefits on “misconduct” grounds under Minn. Stat. § 268.095(6)(a). Seretse v. Doherty Employment Service, 2008 WL 3289413 (Minn. Ct. App. 2008) (unpublished).
• Unemployment Compensation. An employee who breached a duty of loyalty to his employer was disqualified from unemployment compensation benefits. The claimant, a patient financial advocate for a pharmacy, was fired for trying to convince an insurer to terminate its contract with the pharmacy due to what he felt was poor service by the pharmacy to its patients. His conduct was a breach of loyalty to his employer, thus “misconduct.” Marn v. Fairview Pharmacy Services, LLC, 2008 WL 4394182 (Minn. Ct. App. 2008).
• Unemployment Compensation. A food service employee who quit due to a hostile environment was entitled to unemployment benefits. The Court of Appeals reversed a denial of benefits because the employee was “yelled at and called extremely offensive names in front of customers,” which constituted “an adverse condition that would compel a reasonable worker to quit” under Minn. Stat. § 268.095, subd. 3(c). The employee had notified the employer of the problems, but the management failed to correct them after a reasonable opportunity. Studniski v. Baja St. Cloud, LLC, 2008 WL 4394686 (Minn. Ct. App. 2008) (unpublished).
ADMINISTRATIVE LAW
Two federal administrative agencies have issued guidelines dealing with employment law issues. The Equal Employment Opportunity Commission (EEOC), reports a doubling of religious bias claims in the workplace since 1992, has recently adopted a new compliance manual on religious discrimination litigation and relevant case law.
The Office of Federal Contract Compliance has issued new directives to aid military veterans who apply for jobs online entitled The “Good Faith Initiatives for Veterans Employment,” or “G-Five.” The measure creates incentives for federal contractors and subcontractors for hiring, promotion, and other affirmative action for veterans.
— Marshall H. Tanick
Mansfield Tanick & Cohen, PA
In this month's "Notes & Trends:
ENVIRONMENTAL LAW
JUDICIAL LAW
• Minnesota District Court Vacates Forest Service FEIS. The United States District Court for the District of Minnesota on September 15, 2008 vacated the U.S. Forest Service’s Final Environmental Impact Statement (“FEIS”) regarding the Forest Service’s decision to conduct timber sales and road building in the Echo Trail Area Forest Management Project in the Superior National Forest. The vacatur came as part of the court’s ruling on cross-motions for summary judgment brought by the Forest Service, the plaintiff environmental and conservation organizations and the intervening industry groups.
The court first found that the Forest Service failed to take the requisite “hard look” under the National Environmental Policy Act (“NEPA”) at the impacts of the project on the water quality within the nearby Boundary Waters Canoe Area Wilderness (“BWCAW”). Specifically, the court found no support for the Service’s conclusion that there was no need for separate consideration of the project’s impacts on the BWCAW’s water quality because any such impacts would be minimal, at most. On the other hand, the court rejected the plaintiffs’ contention that the Forest Service failed to conduct the requisite analysis of the cumulative impacts of other harvesting projects, or how the BWCAW might be affected by the contribution of non-native invasive species resulting from the Project. The court also rejected the plaintiffs’ allegations that the Service’s approval violated § 4(b) of the Wilderness Act, violated NEPA by inadequate consideration of impacts on lynx conservation and recovery, and violated the National Forest Management Act by improper use of “management indicator species.” Nevertheless, because of the FEIS’s defect as to impacts on the BWCAW’s water quality, the court vacated the FEIS, ordered that it be amended and enjoined the Forest Service from implementing the project until it amended the FEIS as ordered. Sierra Club Northstar Chapter, et al., v. Kimbell, 2008 WL 4287424 (D. Minn. 2008).
ADMINISTRATIVE ACTIONS
• EPA Issues New “Definition of Solid Waste” Rule to Encourage More Recycling. The U.S. Environmental Protection Agency (“EPA”) finalized its new definition of solid waste in a pre-publication Federal Register notice on October 7, 2008. Under the new rule, hazardous secondary materials that are “legitimately” reclaimed or that the EPA or an authorized state determines to be “non-wastes” through a case-by-case determination are excluded from the definition of “solid waste” under federal law. The new rule sets forth standards as to what constitutes “legitimate” reclamation activities.
The new rule had not yet been published in the Federal Register as of the time of this writing. A copy of the final rule, however, can be found at http://www.epa.gov/epawaste/hazard/dsw/downloads/dsw-rule08.pdf. The rule will take effect 60 days following its publication in the Federal Register.
— William P. Hefner
The Environmental Law Group, Ltd.
In this month's "Notes & Trends:
FEDERAL PRACTICE
JUDICIAL LAW
• Rule 11 Sanctions Affirmed. The Eighth Circuit found no abuse of discretion in a district court’s decision to impose more than $9,000 in Rule 11 sanctions against a plaintiff where the plaintiff’s claims were barred by res judicata, and where defendant’s counsel had complied with Rule 11’s “safe harbor” requirements. Kountze ex rel. Hitchcock Foundation v. Gaines, 536 F.3d 813 (8th Cir. 2008).
• Motion to Compel; Necessary Elements for Privilege Log. Granting in part and denying in part plaintiffs’ motion to compel, Magistrate Judge Boylan noted that a privilege log must identify any withheld information by, inter alia: (1) date; (2) author; (3) primary addressee; (4) secondary addressees; (5) type of document; (6) party asserting the privilege; (7) subject matter; and (8) whether the privilege claimed is the attorney-client and/or the work product privilege. Shqeirat v. U.S. Airways Group, Inc., 2008 WL 4232018 (D. Minn. 2008).
• 28 U.S.C. § 1292(b); Certifications for Interlocutory Appeal Denied. In two cases, Judge Montgomery denied defendant’s motion to certify for interlocutory appeal pursuant to 28 U.S.C. § 1292(b). One involved her denial of a prior motion to decertify a class action, as to which she found neither a “substantial ground for difference of opinion” nor a likelihood that an interlocutory appeal would “materially advance” the litigation. The other involved an ERISA action, and she said she “need not” determine whether a substantial ground for difference of opinion existed because the request “clearly” failed to establish that an interlocutory appeal would advance the ultimate termination of the litigation. Mooney v. Allianz Life Ins. Co., 2008 WL 4402188 (D. Minn. 2008); Minnesota Power and Affiliated Cos. Retirement Plan A v. Capital Guardian Trust Co., 2008 WL 4287568 (D. Minn. 2008).
• Request for Leave to File Motion for Reconsideration Denied. Judge Kyle denied defendant’s letter request for leave to file a motion for reconsideration, finding the request untimely, and also finding that the defendant was seeking to use a motion for reconsideration “to cite legal authority which it could have, and should have, cited” in support of its original motion. Motley v. Homecomings Financial, LLC, 2008 WL 4346650 (D. Minn. 2008).
• Local Rule 39.1; Detail Required for Trial Witness Lists. Judge Kyle issued a sua sponte order on the eve of trial criticizing all parties for failing to file trial witness list providing the detail required by Local Rule 39.1(b)(1)(C), and directed all parties to file revised witness lists containing narratives of anticipated witness testimony (not just identifications of topics), with the warning that any subjects not addressed in the narratives might be excluded at trial. Veliz v. City of Minneapolis, 2008 WL 4544433 (D. Minn. 2008).
• Attorney Fee Award for Lanham Act Default Judgment; Hourly Rates. Judge Tunheim awarded plaintiffs more than $68,000 in attorney fees and costs after they obtained a default judgment and permanent injunction, approving rates as high as $567 per hour. Richemont Int’l, S.A. v. Clarkson, 2008 WL 4186254 (D. Minn. 2008).
• Motion to Compel Denied; Relevance and Timeliness. Chief Magistrate Judge Erickson denied plaintiffs’ motion to compel additional discovery from two defendants where that motion was not pursued for more than five months after initial discovery responses were received from those defendants, finding that the discovery was not relevant, and that plaintiffs’ delay in bringing their motion to compel suggested that the disputed discovery was not “sufficiently important.” Bredemus v. Int’l Paper Co., 2008 WL 4181185 (D. Minn. 2008).
— Josh Jacobson
The Law Office of Josh Jacobson
In this month's "Notes & Trends:
INTELLECTUAL PROPERTY
JUDICIAL LAW
• Judge Tunheim concluded that $400 per hour was a reasonable rate for attorneys’ fees in a trademark and copyright infringement case resulting in default judgment for plaintiff. Focusing on the reasonableness of the hours spent and the hourly rate, the court determined that 120 hours at $400 per hour was reasonable for a complex intellectual property case, and awarded $68,000 in fees and costs to plaintiff. “In light of the complexity of this case . . . the Court finds that this is a reasonable hourly rate for the specialized legal services provided.” Richemont Int’l, S.A. v. Clarkson, 2008 WL 4186254 (D. Minn. 2008).
Judge Schiltz waded through a labyrinth of appellate decisions to create some straightforward guidance on how to establish the date of an invention. Spectralytics sued Cordis for patent infringement. The parties disputed whether certain information was prior art, i.e., available before the date of the patented invention. If the disputed information predated the invention, Cordis could use the prior art to try to prove Spectralytics’ patent is invalid. To keep the information out, Spectralytics would need show that the invention existed before the information was available. The court asked three questions to determine whether summary judgment was appropriate: (1) Did the patent owner produce evidence of an invention date? (2) If so, was that evidence corroborated at all? (3) If so, was the evidence sufficiently corroborated? If the answer to these questions was yes, there was a fact issue for the jury. Applying these questions to the facts of the case, the court held that a dated drawing sufficiently corroborated Spectralytics alleged invention date, creating a question of fact. Spectralytics, Inc. v. Cordis Corp., 2008 WL 4216343 (D. Minn. 2008).
The Court of Appeals for the Federal Circuit, en banc, simplified the law regarding design patent infringement. Design patents cover the decorative appearance of products. Previously, a design patent owner had to satisfy two separate tests to prove infringement: (1) the ordinary observer test and (2) the point of novelty test. The ordinary observer test required that the accused design so resemble the patented design that an ordinary observer might purchase the accused product believing it was the patented product. The point of novelty test compared the patented design to the prior art and asked whether the accused design incorporated elements that distinguished the patented design from the prior art. The appellate court held that district courts should apply only the ordinary observer test and disposed of the point of novelty test as a separate requirement. Egyptian Goddess, Inc. v. Swisa, Inc., 2008 WL 4290856 (Fed. Cir. 2008).
—Eric R. Chad
—Anthony R. Zeuli
Merchant & Gould, PC
In this month's "Notes & Trends:
JUVENILE LAW
JUDICIAL LAW
• Termination of Parental Rights. In an unpublished decision, the Court of Appeals reviewed a situation where a minor child’s biological aunt and uncle, who had obtained custody of the child in a family court proceeding, sought to involuntarily terminate the biological mother’s parental rights to the child. The mother had an extensive criminal history and had served time in prison. She had agreed to transfer her legal and physical custody of the child to the aunt and uncle, and as part of that agreement was awarded supervised parenting time by the aunt and uncle every other weekend. As a result of the transfer of custody, the county never filed a Child in Need of Protection or Services petition, so the child was never the subject of a CHIPS proceeding. In their TPR petition, the aunt and uncle relied upon the mother’s abandonment of the child. The district court granted the petition, and mother challenged that decision, claiming that the county had erroneously not been made a party to the proceeding, and that the county had never made reasonable efforts at reunification. In subsequent post-trial motions, the trial court joined the county as a party and amended its order to include findings that various efforts were made to reunify the child and the mother, and that reasonable efforts at reunification were not required as reunification was futile and therefore unreasonable under the circumstances.
In its unpublished decision upholding the termination of the mother’s rights, the Court of Appeals held that the petitioners did not rely on a presumption of abandonment, and therefore, reasonable efforts by a social service agency to facilitate contact between the mother and the child were not required before parental rights could be terminated on the basis of abandonment. Here, the mother did not have any contact with the young child for 20 months, despite the provision for supervised parenting time in the family court custody order. The district court found that the mother had virtually no relationship with the child, the psychologist who performed a parenting assessment opined that it would take the mother 12 to 18 months to complete a treatment plan if she participated with accountability, motivation, and insight, and the district court found that it is in the child’s best interest to have stability, permanency, and consistency. In the Matter of the Welfare of the Child of M.A.B. and R.A., 2008 WL 4394760 (Minn. Ct. App. 2008).
• Representation of Minors. In an unpublished decision, the Minnesota Court of Appeals reviewed a situation where a pro se appellant mother and father have a daughter in common who is in the mother’s physical custody. The father is married to another person who has a son from her prior relationship. The boy’s father has physical custody of him. The mother sought a harassment/restraining order (“HRO”) proceeding filed on behalf of her daughter against the boy’s father. In this proceeding, the boy’s mother was not named in the petition, but she requested an evidentiary hearing and appeared at the hearing on behalf of the boy. The mother’s request for the HRO on behalf of her daughter was based on allegations that the step-son of the girl’s father had abused the daughter. The boy’s father was served with the notice of the HRO proceeding, but he did not appear otherwise to represent his son. The mother did not name the step-father’s wife in the petition. The district court dismissed the proceeding after the court conducted an evidentiary hearing pursuant to the boy’s mother’s request. The Court of Appeals concluded that the district court did not err in holding a hearing as request by the boy’s mother because the boy’s mother functionally served as his Guardian ad Litem, whom the court had the authority to appoint. Also, the boy’s mother defended the allegations in the HOR petition on behalf of the boy, who was otherwise unrepresented. Weidner v. Hurt, 2008 WL 4394712 (Minn. Ct. App. 2008).
• Adoption. In a Minnesota Supreme Court decision, a biological father moved to enforce his rights under a contact agreement he entered into with the adoptive parents of his biological child. Under the agreement, the biological father had the right to overnight visitation with the child every third weekend and to take the child to church, to be called “Pappa C,” to have reasonable telephone contact with the child, and to take the child to Panama in the fall of 2005 and again when the child was older. His contact with the child was contingent upon his abstaining from alcohol or drugs 24 hours before and during visits with the child. The contract also required him to continue to attend substance abuse support group meetings as recommended by his sponsor, submit to breath analysis randomly at the request of the adoptive parents, and to let the adoptive parents inspect and approve any new home to which he may move. If he failed to comply with the terms of the agreement, it was subject to termination. The agreement also required the biological father to attend adoption classes or adoption counseling, and that disputes under the agreement were to be submitted to mediation before being submitted to the courts.
Disputes over the biological father’s contact with the child arose soon after it was executed. The biological father brought a motion to enforce the terms of his access, and the adoptive parents sought to terminate the contract. Without an evidentiary hearing, the district court made numerous findings that the biological father had failed to comply with the terms of the contact agreement and that it was in the child’s best interest to have no further contact with the biological father.
The biological father appealed, and in an unpublished decision, a divided Court of Appeals affirmed the district court order terminating the biological father’s contact with the child. The Supreme Court accepted the matter for further review and held that when parties to an adoption contact agreement entered into under Minn. Stat. § 259.58 dispute factual allegations regarding whether modification is justified, the trial court shall hold an evidentiary hearing. A party seeking modification of such a contact agreement has the burden of proving by a preponderance of the evidence each of the elements necessary for modification as set forth in that statute. In this case, where the district court relied on the written submissions of the parties and statements made at a motion hearing to vacate the order approving the contact agreement, the Supreme Court remanded the matter for an evidentiary hearing. C.O. v. Doe, 2008 WL 4425862 (Minn. 2008).
– Gary A. Debele
Walling, Berg & Debele, PA
In this month's "Notes & Trends:
REAL PROPERTY
JUDICIAL LAW
• Zoning and Planning; Preliminary Plat Approval. A developer submitted an application for a preliminary plat approval to the county on the county’s application form, which required an approval letter from the township. Because the developer did not include a township approval letter, the county returned the application as incomplete. The developer re-submitted the identical application, still with no approval letter, arguing that such a letter was not required. Within 60 days of both applications, the county environmental services director sent a letter to the developer extending the 60-day time for action in Minn. Stat. § 15.99, Subd. 2(a), by an additional 60 days, pursuant to Minn. Stat. § 15.99, Subd. 3. Over 60 days after the original application without official action by the county, the developer sought a writ of mandamus directing the county to approve the preliminary plat. The district court denied the writ and the developer appealed. At a meeting within 120 days of both applications, the Planning Commission denied the developer’s preliminary plat approval application because the developer failed to comply with township requirements and a county ordinance on lot sizes. The developer tried to appeal the Planning Commission’s decision to the County Board, but the appeal was rejected. The developer then petitioned the Court of Appeals for a writ of certiorari to review the county’s denial.
The Court of Appeals consolidated the original appeal and the petition for writ of certiorari, and held that that the subdivision application was approved by law because the county took no action on the application within 60 days after the application was submitted. The Supreme Court of Minnesota reversed.
Without deciding whether the 60-day Rule set forth in Minn. Stat. § 15.99 applies to county decision approving or denying a subdivision application, the court held that even if the rule did apply, the county complied with it. The Court found that the county could require a township approval letter as part of the application process, so the developer’s first application was not completed. While the second application also lacked such a letter, the county apparently nevertheless treated it as complete. The developer argued that the environmental services director lacked authority to extend the 60-day period. The Court disagreed and found that the extension letter was an action of an agency under Minn. Stat. § 15.99, Subd. 3(f). There was nothing in the record to suggest the director did not have the authority to act on behalf of his department, which was a department of the county, which is an agency under the plain language of the statute. Therefore, the Court held that the time limitation was properly extended to 120 days, so the application was timely denied. Finally, the court rejected an argument that a delegation of the power to “approve” applications did not confer the power to deny them. Justice Dietzen concurred separately and would have decided the threshold issue and would have held that the requirements of the 60-day Rule in Minn. Stat. § 15.99, Subd. 2(a) applies to county decisions approving or denying a subdivision application. Calm Waters, LLC v. Kanabec County Board of Commissioners, et. al., 2008 WL 4346312 (Minn. 2008).
• Condemnation; Appeal. The Housing and Redevelopment Authority for the City of Fridley petitioned to condemn real property. Property owner challenged the public purpose and necessity of the taking. The district court granted the government’s condemnation petition. Within 60 days after the order, the property owner filed a motion in the district court for a new trial and then subsequently filed an appeal with the court of appeals before the district court ruled on the motion for a new trial. The Court of Appeals questioned whether the appeal was premature due to the pendency of the motion for a new trial. After the parties submitted jurisdiction memoranda, the Court of Appeals held that the time to appeal a court order of condemnation is not tolled by a post-decision motion. Minn. Stat. § 117.075, subd. 1(c) states that an order granting condemnation becomes final unless an appeal is taken with 60 days after service of the order on the other party. The court noted that eminent domain proceedings are “special proceedings” and, unlike some other special proceedings, the legislature has not authorized eminent domain proceedings to proceed like other civil cases. Therefore, the court held that the motion for a new trial does not toll the appeal time under Minn. R. Civ. App. P. 104.01, subd. 2. The Court of Appeals ruled that the district court lost jurisdiction to rule on the motion for a new trial once the appeal was filed. The Court of Appeals ordered the appeal to proceed. The Housing and Redevelopment Authority in and for the City of Fridley v. Main Street Fridley Properties, LLC,755 N.W.2d 789 (Minn. Ct. App. 2008).
• Association Lien Foreclosure; Fair Debt Collection Practices Act. In the foreclosure of an association assessment lien, homeowner contended that a lawyer and law firm violated the FDCPA by failing to provide the correct amount due and owing during the foreclosure proceedings, indicating an incorrect redemption expiration date, and attempting to recover unauthorized attorney fees. The U.S. District Court for the District of Minnesota, held that the enforcement of a security interest, including a lien foreclosure, does not constitute debt collections under the FDCPA. The court noted that the statute’s definition of “debt collector” reflects Congress’ intent to distinguish between the collection of debts and the enforcement of security interests. The court reasoned that if the enforcement of a security interest was synonymous with debt collection, the distinction in the statute would be superfluous. Gray v. Four Oak Court Ass’n, et. al., 2008 WL 4371380 (D.Minn).
– Michael E. Kreun
Beisel & Dunlevy, PA
In this month's "Notes & Trends:
TAX LAW
JUDICIAL LAW
• Depending on the Case, Medical Residents Might Qualify for FICA Exemption. The U.S. Court of Appeals for the Seventh Circuit held that medical residents are not per se ineligible for a student exception under Internal Revenue Code § 3121(b)(10). The court instead reasoned that a case-by-case analysis is required to determine qualification for the exemption. University of Chicago Hospitals v. United States, 2008 WL 4301442 (7th Cir. 2008). See also United States v. Mount Sinai Med. Ctr., 486 F.3d 1248, 2152 (11th Cir. 2007); Mayo Foundation for Medical Education and Research v. United States, 503 F.Supp.2d 1164 (D. Minn. 2007).
• State Appeals Court Strips Tax-Exempt Status From Catholic Hospital in Central Illinois. The Illinois Court of Appeals affirmed the Illinois Department of Revenue’s determination that stripped Provena Covenant Medical Center of its property tax exemption. In its lengthy opinion, the three-judge appeals panel unanimously supported the Department of Revenue’s analysis, finding “no clear error in the director’s decision.” The court’s language is broadly critical of the “slippage” within the concept of charity, and the opinion has caused consternation among other Illinois non-profits generally, and hospitals in particular. Provena Covenant Medical Center v. Illinois Department of Revenue,2008 WL 3989685 (Ill. Ct. App. 2008).
ADMINISTRATIVE LAW
• Barnesandnoble.com Settles Online Tax Collection Dispute with California SBOE. Barnes andnoble.com and the California State Board of Equalization have been in a long-running dispute over the bookseller’s obligation to collect and pay sales and use tax on online purchases. The dispute has been settled, with Barnesandnoble.com agreeing to pay $9 million in a global settlement with the Board. The settlement was disclosed in a filing with the Securities and Exchange Commission and has resulted in the dismissal of the pending cases.
• Adoption Bill Revises Definition of ‘Child’ to Pay for New Incentives. President Bush signed the Fostering Connections to Success and Increasing Adoptions Act (H.R. 6893), which will raise $1.75 billion to fund new incentives and aid for adoption and foster care programs by modifying the definition of “child.” A qualifying child must be younger than the individual claiming the tax benefit, or be permanently and totally disabled, and a parent may claim a qualifying child only if no other individual may claim that child.
• Motor Vehicle Tax Credit. The IRS announced in IR-2008-113 that certain advanced lean-burn technology vehicles, which generally run on diesel fuel, have been certified as qualifying for the alternative motor vehicle tax credit. The qualifying vehicles and the credit amounts are as follows: 2009 Volkswagen Jetta 2.0L TDI SportWagen manual or automatic—$1,300; Mercedes GL 320 BLUE TEC—$1,800; Mercedes R 320 Blue TEC—$1,550; Mercedes ML 320 Blue TEC—$900.
• 2008 Form 990-EZ Instructions Released. According to a Sept. 10, 2008 IRS web posting, the revised instructions to the Form 990-EZ are now available. Filing thresholds for Form 990-EZ have been increased significantly for 2008, which should permit about 75% of all exempt organizations to use the EZ form, according to the IRS. Eligibility amounts for Form 990-EZ filers were increased for the 2008 tax year for organizations whose gross receipts are less than $1 million, and whose total assets are less than $2.5 million. Forms are available at irs.gov.
• It Wasn’t News until the Palin Pick: Alaskans’ Dividend Rebates Taxable; Dependent Children Will Have to File, Pay Tax. The IRS announced that due to the size of the Alaska Permanent Fund Dividend and the new Alaska Resource Rebate every Alaskan dependent child will need to file a special federal tax return. The Permanent Fund Dividend Division of the Alaska Department of Revenue reports that the 2008 Alaska dividend is $3,269 per person.
• “Pulpit Freedom Sunday.” Thirty-three pastors, including a Minnesotan from Warroad, participated in “Pulpit Freedom Sunday,” preaching in favor of or in opposition to presidential candidates. Many pastors endorsed or opposed candidates by name, which is a violation of federal tax law prohibiting tax-exempt organizations from engaging in partisan political activity. The event was spearheaded by the Alliance Defense Fund, which describes itself as “a legal alliance defending our right to hear and speak the Truth.” Several groups have called on the IRS to investigate, and the New York Times quoted a spokesman for the Service as noting that the Service is aware of the event and “will monitor the situation and take action as appropriate.”
LOOKING AHEAD
• Updated Per Diem Travel Rates and Rules. In Revenue Procedure 2008-59, the IRS updated the rules for determining the amounts an employee or self-employed individual may be reimbursed for ordinary and necessary business expenses for lodging, meals, and incidentals while traveling away from home.
• Scrutiny of U.S. Colleges and Universities. The IRS sent compliance questionnaires to approximately 400 U.S. colleges and universities as part of the agency’s focused effort to study key areas in the tax-exempt community. Questions focus on unrelated business income, endowments, and executive compensation practices. The IRS expects to issue a report on the project in 2009.
• Tax Provisions in Bailout Bill. The Senate Finance Committee identified the following tax provisions in the Emergency Economic Stabilization Act of 2008.
• Help for Homeowners Sinking Under Mortgage Debt. To keep struggling homeowners from facing higher tax bills, the rescue plan will extend through 2012 the housing bill provision that forgives income from the cancellation of indebtedness. It does not extend the relief to home equity loans.
• Fairness for Banks Hit by the Failures of Fannie Mae and Freddie Mac. Federal law limits the allowable investments for banks, and so many community banks invested in Fannie Mae- and Freddie Mac-preferred stock—which became worthless when the government bailed those companies out. This proposal ensures fairness for the approximately 800 banks that held Fannie and Freddie preferred stock, by allowing financial institutions or financial institution holding companies to treat their Fannie and Freddie losses as ordinary losses. Applying to any preferred stock that was owned on September 6, 2008 or sold between January 1 and September 6, 2008, this provision will allow banks to claim the book benefit of the loss on their tax returns, therefore reducing the need to obtain additional capital from the FDIC or investors. This should also prevent some community banks from becoming insolvent.
• Stronger Taxation of Compensation and Severance Pay for Financial Executives. The financial rescue plan contains non-tax measures aimed at limiting executive compensation and “golden parachute” severance packages overall for companies and executives participating in the buyout—a key element in gaining approval of the package among negotiators. When the Treasury Department directly buys assets from a company, not through an auction or bidding process, the financial institution will be required to meet certain standards for executive compensation, including a total prohibition on “golden parachute” severance payments to senior executive officers.
– Morgan L. Holcomb
Hamline University